Dealscape has a nice post today on the fees Goldman Sachs & Co. is charging to advise Midwest Air Group Inc. on the unsolicited bid to acquire the airline by AirTran Holding's Inc. The post discusses a May 23 letter from CtW Investment Group to Midwest’s board complaining of Goldman's fee structure disclosed in Midwest's proxy filing which CtW says appears to pay the bank $7.4 million if there is no merger, but just $4.9 million if one does take place. However, Dealscape goes through the numbers in light of Midwest's subsequent public comments on the letter and finds that the payment to Goldman is probably about $10.5 million in the event of a deal, an amount higher than what it will get if no transaction is done.

Midwest shareholders have repeatedly complained of Midwest's adamant "Just Say No" response to the AirTrans bid asserting that it is not in the best interests of shareholders. If Goldman were indeed getting more in the case of no deal it would certainly throw gas on the fire. But I wouldn't be terribly concerned -- investment bank conflicts are all too standard when they represent clients. Their fees are typically contingent, they often provide financing to buyers when representing sellers and they issue fairness opinions knowing they will not be paid if they cannot find the transaction fair. Since these are sophisticated parties, the keystone which permits these conflicts to exist is full disclosure. And that is the real problem -- Midwest's proxy does not clearly disclose what Midwest is paying Goldman and what Goldman is doing for its money. Here, provided the services being rendered for a sale and defense were different the fee differential might even be justified. But we just don't know. It would behoove the SEC in its review of Midwest's proxy to force Midwest to correct this disclosure.